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Lush Fresh Handmade Cosmetics, a privately-owned, U.K. based company, with its North American headquarters in Vancouver, is all about growth on its own terms, at its own pace, within its own strictly defined values.
Because the ethical foundations of the brand include animal welfare, environmental protection and human rights, it means the company does business with those suppliers and countries that share those values. It means, for example, not doing business with the rapidly growing Chinese market, where animal testing of cosmetics is mandatory.
Such a limitation naturally caps expansion, but the company is nothing without its mandate for manufacturing and selling sustainable, fair, and cruelty-free cosmetics.
“Sure, it limits growth, but you can’t leave your ethics at the door,” COO Andy McNevin said in an interview, following his speech last November at PwC’s 9th Annual Business Update for Private Companies in Vancouver. “You are all in, or you are all out. When we look at the Chinese market, and we have for years — it’s a big, growing market and a big, big opportunity for us — but we just can’t contemplate it until they change their laws. So we have had to make the decision to grow more slowly globally but maintain our ethics.”
Behind the scenes, Lush is lobbying the Chinese government to change their laws, as well as educating consumers wherever possible about the fact that cruelty-free is an option.
The company is also continually pushing for less packaging, fair trade practices, employee engagement and a goal to one day use zero preservatives, despite the fact that many of their products already are mostly preservative free.
The company’s uniquely fresh ingredients, innovative product line, and devotion to sustainable practices have earned it a zealous consumer following, with almost 900 stores in 52 countries in 17 years. In the last decade, the company has seen compounded annual growth at 22 per cent. The company forecasts $208 million in North American sales, with 47 stores in Canada and 140 more in the U.S — and growing. The mostly corporate run stores have also moved into markets in Japan, the U.K. and Ireland, Russia, Korea, Germany, Italy, France, Australia, and another 199 stores elsewhere in the world.
The goal, says McNevin, is to open 30 to 40 stores a year, while adding new products that make up 30 per cent of the line each year; without resorting to paid advertising or promotional sales, and while overcoming challenges to shipping product that has a short shelf life due to the natural ingredients, which include fruits and vegetables.
But mostly, Lush has the challenge of growing the business while maintaining its culture, a task that is far easier as a privately-held company, says McNevin.
“Could we do it if we were public? Maybe. But it would be much more challenging, where the focus is around quarterly earnings and bottom line,” he said. “As a privately-held business, yeah, we are very interested in bottom line that will help us fund continued growth and product innovation and so on, but bottom line is just one of our metrics. We are very interested in some of the other ethical pieces as well.”
In order to maintain control over that essential brand value, it has meant implementing consistent practices to ensure an employee and consumer culture is achieved that reflects those values. People, says McNevin, are key. The company undertook an extensive North American wide search for an appropriate Chief Financial Officer, for example.
“It took a long, long time to find somebody who had that quirkiness and fun and ethics that aligned with ours,” says McNevin.
“As we have evolved, we have screened better for the right cultural candidate,” he adds. “Our business is all about the people.”
The biggest people problem came to light only recently, and it was an unexpected one. It turned out, that where their sales are concerned, the state of the economy doesn’t matter. Because they have a built-in ardent consumer base, their employees are usually pre-existing customers who are already intensely familiar with the brand. However, a loyal, passionate and knowledgeable employee, they discovered, isn’t automatically a competent salesperson. Not long after the world economic crash of 2008, Lush noticed a slow-down in sales, and of course believed that they too had fallen victim to the financial crisis. But a closer look at consumer behaviour showed that it wasn’t simply a case of bad timing. By analyzing secret shopper results, Lush realized its own staff was falling far short in sales ability. The downturn had nothing to do with its declining revenues.
“Our staff really understood the products, and how great the ingredients were, and they really loved to demonstrate it, and do demos, but they just didn’t have the sales techniques — how to engage and close a sale,” says McNevin.
They devised the “30 Day Challenge,” bringing all support staff into the stores for training, giving them fun, prize-winning challenges to out-sell other stores, inspiring their competitiveness, and honing sales skills in the process. The business turned around overnight, says McNevin.
“We were experiencing negative comp store growth right up to the 30 Day Challenge. When we did the challenge, we immediately started getting double digit comp store increases, and that’s continued for four years.
“In the fifth year, we’re now getting double-digit increases, year-over-year.
“I think it helped that we are a pretty flat structure, so we can react very quickly and change on a dime, whereas it takes some of our competitors probably a bit longer to react to things,” McNevin says. “And the other elements are, we invest really heavily on staff engagement — our staff love us, they stay with us, and I think that the customer sees that.”